Flounder Company began operations late in 2016 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2016 and no markdowns during 2016, the ending inventory for 2016 was $12,302 under both the conventional retail method and the LIFO retail method. At the end of 2017, management wants to compare the results of applying the conventional and LIFO retail methods. There was no change in the price level during 2017. The following data are available for computations.

Compute the cost of the 2017 ending inventory under both:

(a) The conventional retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)

Ending inventory using the conventional retail method: $

(b) The LIFO retail method.(Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)

Ending inventory at cost: $

Ending inventory at retail: $

Question 2 [15 marks]
Phoenix Photography Company experienced a sharp decrease in Net Income during the year 2016. Madea Perry, the owner of the company, anticipates a need for a Bank loan in the year 2017. Late in 2016, Perry instructed Reunion Mann, the accountant, and friend of his to record a R10, 000 sale of portraits to the Perry family even though the photos will not be shot until January 2017. Perry told Reunion not to make the following December 31 2016 adjusting entries
Salaries owed to employees R 20000
Prepaid insurance that has expired 2000
Required:
1. Compute the overall effect of these transactions on the company’s reported income for 2016. Is the reported net income overstated or understated.
2. Why did Madea take these actions? Are they ethical? Give your reason, identifying the parties that benefitted and those that were harmed by Madea’s actions.
Use the ethical decision making model which factor (economic, legal or ethical) seems to be taking precedence? Identify the stakeholders and potential consequences to each.
3) As a personal friend of Perry’s, what advice would you give to him?

At year-end 2016, total assets for Arrington Inc. were $2 million and accounts payable were $430,000. Sales, which in 2016 were $2.6 million, are expected to increase by 15% in 2017. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Arrington typically uses no current liabilities other than accounts payable. Common stock amounted to $390,000 in 2016, and retained earnings were $230,000. Arrington plans to sell new common stock in the amount of $140,000. The firm's profit margin on sales is 6%; 45% of earnings will be retained.

1. What were Arrington's total liabilities in 2016? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent.
   $
2. 
   
3. How much new long-term debt financing will be needed in 2017? Write out your answer completely. For example, 25 million should be entered as 25,000,000. Do not round your intermediate calculations. Round your answer to the nearest cent. (Hint: AFN - New stock = New long-term debt.)
   $

Question 2 [15 marks]
Phoenix Photography Company experienced a sharp decrease in Net Income during the year 2016. Madea Perry, the owner of the company, anticipates a need for a Bank loan in the year 2017. Late in 2016, Perry instructed Reunion Mann, the accountant, and friend of his to record a R10, 000 sale of portraits to the Perry family even though the photos will not be shot until January 2017. Perry told Reunion not to make the following December 31 2016 adjusting entries
Salaries owed to employees R 20000
Prepaid insurance that has expired 2000
Required:
1. Compute the overall effect of these transactions on the company’s reported income for 2016. Is the reported net income overstated or understated.
2. Why did Madea take these actions? Are they ethical? Give your reason, identifying the parties that benefitted and those that were harmed by Madea’s actions.
Use the ethical decision making model which factor (economic, legal or ethical) seems to be taking precedence? Identify the stakeholders and potential consequences to each.
3) As a personal friend of Perry’s, what advice would you give to him?

1) Company's Current ratio

2017 Current ratio = 2.055

2016 Current ratio = 2.077

Explain what information this ratio provides (define), and what the results mean specifically to your

company. Use complete sentences in your own words.

Has the current ratio improved?_________________________

2) Company's Debt ratio

2017 Debt Ratio =0.417987 = 41.799%

2016 Debit Ratio = 0.415240 = 41.524%

Explain what information this ratio provides (define), and what the results mean specifically to your

company Use complete sentences

Has the ratio improved? __________________

3) company Profit Margin

2017 Profit Margin Ratio = 0.232000663 =23.200%

2016 Profit Margin Ratio = 0.199640614 =19.964%

Explain what information this ratio provides (define), and what the results mean specifically to your

company. Use complete sentences.

Has the ratio improved? __________________

4) Return on assets

2017 Return on assets = 0.116538645 =11.654%

2016 Return on assets = 0.09205004 = 9.205%

Explain what information this ratio provides (define), and what the results mean specifically to your

company. Use complete sentences

Has the ratio improved? __________________

1) Company's Current ratio

2017 Current ratio = 2.055

2016 Current ratio = 2.077

Explain what information this ratio provides (define), and what the results mean specifically to your

company. Use complete sentences in your own words.

Has the current ratio improved?_________________________

2) Company's Debt ratio

2017 Debt Ratio =0.417987 = 41.799%

2016 Debit Ratio = 0.415240 = 41.524%

Explain what information this ratio provides (define), and what the results mean specifically to your

company Use complete sentences

Has the ratio improved? __________________

3) company Profit Margin

2017 Profit Margin Ratio = 0.232000663 =23.200%

2016 Profit Margin Ratio = 0.199640614 =19.964%

Explain what information this ratio provides (define), and what the results mean specifically to your

company. Use complete sentences.

Has the ratio improved? __________________

4) Return on assets

2017 Return on assets = 0.116538645 =11.654%

2016 Return on assets = 0.09205004 = 9.205%

Explain what information this ratio provides (define), and what the results mean specifically to your

company. Use complete sentences

Has the ratio improved? __________________

1) Company's Current ratio

2017 Current ratio = 2.055

2016 Current ratio = 2.077

Explain what information this ratio provides (define), and what the results mean specifically to your

company. Use complete sentences in your own words.

Has the current ratio improved?_________________________

2) Company's Debt ratio

2017 Debt Ratio =0.417987 = 41.799%

2016 Debit Ratio = 0.415240 = 41.524%

Explain what information this ratio provides (define), and what the results mean specifically to your

company Use complete sentences

Has the ratio improved? __________________

3) company Profit Margin

2017 Profit Margin Ratio = 0.232000663 =23.200%

2016 Profit Margin Ratio = 0.199640614 =19.964%

Explain what information this ratio provides (define), and what the results mean specifically to your

company. Use complete sentences.

Has the ratio improved? __________________

4) Return on assets

2017 Return on assets = 0.116538645 =11.654%

2016 Return on assets = 0.09205004 = 9.205%

Explain what information this ratio provides (define), and what the results mean specifically to your

company. Use complete sentences

Has the ratio improved? __________________

Complete the below table to calculate income statement data in common-size percents. (Round your percentage answers to 2 decimal places.)

Carla Vista Ltd. purchased a new machine on April 4, 2014, at a cost of $162,400. The company estimated that the machine would have a residual value of $18,000. The machine is expected to be used for 9,500 working hours during its four-year life. Actual machine usage was 1,400 hours in 2014; 2,100 hours in 2015; 2,300 hours in 2016; 2,000 hours in 2017; and 1,700 hours in 2018. Carla Vista has a December 31 year end.

Calculate depreciation for the machine under each of the following methods: (Round expense per unit to 2 decimal places, e.g. 2.75 and final answers to 0 decimal places, e.g. 5,275.)

(1) Straight-line for 2014 through to 2018.

2014 expense $

2015 expense $

2016 expense $

2017 expense $

2018 expense

(2) Diminishing-balance using double the straight-line rate for 2014 through to 2018.

2014 expense $

2015 expense $

2016 expense $

2017 expense $

2018 expense

(3) Units-of-production for 2014 through to 2018.

2014 expense $

2015 expense $

2016 expense $

2017 expense $

2018 expense